European Housing Prices

The FT has compiled a European house price index. Some of the data is quite surprising (to me, at least):

- Spanish house prices have only started falling year-on-year in Q4 2008, and so far, they are only down 2.8 %. Price increases had been slowing down over quite a while: In mid-2006, they were rising at a rate of 10 %, down to 6 % in mid-2007, and 2 % in mid-2008. Instead of a US-style bubble that popped very quickly, Spain seems to be doing things in slow motion. No idea if that means price declines will be smaller than elsewhere, or if the real crash is still to come.

- Irish house prices have been declining for two years, and are down 15 % from their peak as of Q4 2008. Compared to Spain, things happened much more rapidly: It took just 3 quarters to get from 13 % year-on-year increase to 2 % decline.

- UK prices are also down 15 %, but they managed the same decline in one year instead of two. UK prices had already stagnated back in 2005 (growth rates of 2-3 %), but then re-accelerated (+11 % in Q2 2007) before finally dropping into negative territory in Q2 2008.

- As a sub-region of UK, Northern Ireland is hit the hardest, with a decline of 34 % in just one year. Wow. Though as recently as Q1 2007, prices were rising at an incredible 58 % rate. Compared to 2 years ago, prices are still 21 % higher.

- Most other Western European countries are down a bit, but only in the 0-5 % range.

- German prices are up 2.4 %, and the increase has been accelerating (in Q3, they were up 1.0 % year-on-year, in Q2 down 1.6 %, in Q1 down 2.6 %). Regional discrepancies seem to be large (the FT index doesn't drill down by region; but according to press reports, Munich prices are up more than 10 %, so they must be falling elsewhere to get to a 2.4 % increase overall).

Let's compare this to the US (as of 1/09):

- Compared to peak (July 2006), average house-prices have dropped 29 % in the 20 largest metropolitan areas.

- The best performers were Charlotte (-11 %), Dallas (-11 %) and Denver (-13 %).

- Worst performers are Phoenix (-49 %), Las Vegas (-47 %), San Francisco (-43 %), Miami (-43 %), San Diego (-41 %), Los Angeles (-39 %), Detroit (-39 %).

Compared to the US, what has (so far) happened in Spain, UK and Ireland has been quite moderate (with the exception of Nothern Ireland). Don't know if that means the situation is less serious, or if larger falls are still to come.